02 Jul 2013
Cushman & Wakefield forecasted the office market to reach the bottom of the rental cycle in Q4 2012, which has
now been realised through positive Q2 rental growth across all Grade A submarkets:
- Grade A rental recovery started in H1
- Steadily increasing demand through Q2
- Significant decline in vacancies
- Singapore is benefiting from the increasing economic strength of USA and Japan
- 2013 recovery will be mild, and stronger into 2014
Singapore - Cushman & Wakefield, the world's largest privately held real estate firm, presented key findings on the Singapore Office market from their Q2 Office MarketBeat update today.
The global economy has been recovering gradually, led by the U.S. A higher year-on-year expansion of 6.1% across the finance and insurance sector is expected, which will have a direct effect on office space demand from different industries. In general the services sector has had a positive start to 2013. This quarter's GDP is forecast to grow by 1.3% year-on-year, an increase on the 0.2% for the preceding quarter.
The Singapore office market reached the bottom of the cycle in the last quarter of 2012, and has started to recover. Average Grade A rent increased 4.2% quarter-on-quarter to S$9.03 per square foot per month (psf/mo) this quarter. All the CBD submarkets saw their average rents appreciate. In particular, both Marina Bay and Shenton Way recorded a rise of over 9%. In the fringe area, Orchard Road's average rents moved up by around 4.6% quarter-on-quarter. The average rent in the suburban submarket rose slightly by 1.3% quarter-on-quarter to S$5.64 psf/mo.
Positive tenant sentiment and a sound economic outlook have led to respectable space demand, outpacing supply.
There were no new developments delivered in the CBD, and active leasing resulted in the reduced average vacancy in Marina Bay, Raffles Place and Shenton Way. Among them, Marina Bay performed best, due to continued flight to quality and broad-based leasing demand from companies operating in industries including information and communications, finance and insurance and legal services.
Toby Dodd, Country Manager, Cushman & Wakefield Singapore comments: "Cushman & Wakefield's forecast that the office market would reach the bottom of the rental cycle in Q4 2012 has been realized, with Q2 showing clear growth in rents since the start of the year driven by an increase in take up on a quarter on quarter basis. The most recent transactions in Marina Bay have achieved rents over S$12.00psf, and we expect this trend of rental growth to continue as the Marina Bay offers a new standard of office space. This trend will be further supported by the development of the iconic landmark, Marina One which is slated for completion in 2016."
Sigrid Zialcita, Managing Director for Cushman & Wakefield's Research team in Asia Pacific, comments: "The
recovery has started, albeit slow with a steady outlook for the second half of the year. GDP is forecast to grow at annualized rate of 3-4% in the second half of 2013, and more rapidly over the next year."
Ms Zialcita continued "Marina Bay shows strongest start to the recovery with Grade A vacancies declining 2.0 percentage points from the first quarter and rents rising 10.9% on a quarterly basis."
Investment volume reached S$409.68 million this quarter, representing a year-on-year increase of 21%. Recent evidence of office rent increases points to possible recovery in volumes for the rest of the year. As rent recovery occurs, the Grade A office market is likely to outperform other segments, as investors and occupiers see better value at current pricing levels.
Amongst other noticeable transactions, 25% of Jem's equity interest changed hands for around S$227 million from Lend Lease to a new fund called Lend Lease Jem Partners Fund, of which the Australian company is the investment manager. The rest of Jem's equity stake is held by Lend Lease Asia Retail Investment Fund (ARIF), in which Lend Lease has co-invested.
Priyaranjan Kumar, Regional Director, Capital Markets, Cushman & Wakefield Asia Pacific: comments: "We are witnessing development interest coming back strongly with rents stabilizing and widely believed to be heading up steadily over the next 2-3 years. On an inflation adjusted basis, prime office rents today are back
to 2005-06 levels while prime capital values continue have been very stable at current levels for the last 6 quarters. This provides a fundamentally sound basis to commit development equity. A substantial part of
this demand is from large regional funds and developers, predominantly from North Asia, as well as increasing re-weighting to the domestic markets from Singapore groups."
Conclusion:
- Office market has commenced a steady recovery, with rising rents,
increased demand and falling vacancy rates - Marina Bay shows strongest start to the recovery with an increase in
demand and 10.9% rent increase - Office market reached bottom of the cycle in Q4 2012 as forecasted by
C&W, and has strengthened during the first half of 2013 - Steady growth outlook, supported by better economic forecasts
Toby Dodd concludes: "All in all a positive first half for the Singapore office market, supported by increasing
tenant demand and a more stable economic outlook. We expect to see this positive momentum continue in the second half of the year, paving the way for a
stronger 2014"
-ENDS-
For further information, please
contact:
MEDIA CONTACT:
VogelGoodwin
Tel: + (65) 81331706
RESEARCH CONTACT:
Sigrid Zialcita
+ (65) 6232 0841
sigrid.zialcita@ap.cushwake.com
About Cushman & Wakefield
Cushman & Wakefield is the world's largest privately‐held commercial real estate services firm. The company
advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world's major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments. Founded in 1917, it has 253 offices in 60
countries and nearly 15,000 employees. It offers a complete range of services for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has more than $2.2 billion in assets under management globally. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge.